China rate hike before April possible: PBOC adviser

ChrisOliver

HONG KONG (MarketWatch) — An adviser to China’s central bank indicated on Tuesday an interest-rate hike in the first quarter may be forthcoming as Beijing focuses more on inflation and less on maintaining fast economic growth.

People’s Bank of China’s Li Daokui told reporters in Beijing it would be “understandable” if interest rates would rise as part of adjustments to policy during the quarter, according to a report by Dow Jones Newswires.

Hu Jintao’s conciliatory ton

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China will account for about one-third of global economic growth this year.

Li also said China’s trade surplus as a percentage of gross domestic product would likely ease to around 3.3% in 2010 from 5.8% in the prior year. He estimated further easing this year, with the surplus as low as 1%.

In terms of the economy’s overall growth rate, he forecast an expansion of 9.5% this year, but added that a more sustainable rate of growth would be around 8.5% to 9%.

China’s consumer-price index should rise about 3.5% for the year, Li added.

Energy prices remain a concern, with crude oil set to top $100 or even $120 a barrel at some point this year, Li said.

In a separate development, China may be considering allowing offshore companies to use yuan for foreign direct investments in China, according to Dow Jones Newswires.

Zhang Jianjun, president of the People’s Bank of China Shenzhen Central Sub-branch, said yuan outflows from China were not sustainable.

He did not lay out a timetable for the move, noting that the PBOC needed to have necessary controls in place before allowing more liberalized trade.

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